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First Relief, Then Skepticism After Greece Votes

By Harvey Morris June 18, 2012 5:08 amJune 18, 2012 5:08 am

Panayiotis Tzamaros/Getty Images-AFPAntonis Samaras.

LONDON — European leaders might have given the impression in recent weeks that the Greeks were feckless, tax-cheating ingrates, incapable of distinguishing between a bailout and a handout, and prepared to turn their backs on Europe rather than accept just a bit more economic pain.

To judge by initial reaction to the Greek elections Sunday, however, it turns out the Greeks are sober and responsible citizens, ready to make yet more sacrifices on behalf of their fellow Europeans in order to save the euro and drag the Continent back from the brink of the financial abyss. At least that’s what it sounds like listening to European leaders now.

“We salute the courage and resilience of the Greek citizens,” said the European Council president, Herman Van Rompuy, and the European Commission president, José Manuel Barroso, in a joint statement, “fully aware of the sacrifices which are demanded from them to redress the Greek economy and build new, sustainable growth for the country.”

Anticipating the victory of the pro-austerity New Democracy party as early results came in on Sunday night, Wolfgang Schäuble, the German finance minister, said Germany would regard such a result as “a decision by Greek voters to forge ahead with the implementation of far-reaching economic and fiscal reforms.”

Chancellor Angela Merkel, who had told Greeks on the eve of the vote that they had to elect a government that would honor the country’s obligations for a bailout, rang to congratulate Antonis Samaras on his center-right party’s narrow victory.

Finance ministers of the 17-country euro zone acknowledged “the considerable efforts already made by the Greek citizens” and said they were “convinced that continued fiscal and structural reforms are Greece’s best guarantee to overcome the current economic and social challenges.”

The White House congratulated the Greek people “on conducting their election in this difficult time” and looked forward to the speedy formation of a new government “that can make timely progress on the economic challenges facing the Greek people.”

“Is euphoria appropriate in these circumstances? I wouldn’t say so,” Kenneth Wattret, chief euro zone economist at BNP Paribas, told my colleague Stephen Castle in London. “But there is relief because the election outcome could have been more problematic.”

Mr. Wattret said the respite should help bring down yields, or interest rates, on the sovereign bonds of troubled countries like Spain, a measure of borrowing costs that has been spiking to near-unsustainable levels on fear that the euro crisis would spread.

“But the question is how long that lasts,” he said. “We have been in this crisis for some time and markets have got used to something positive happening and then enthusiasm starts to wane.”

It turns out, it did not last at all. After just two hours of markets being open in Europe, Spanish yields rose to their highest level of the euro era as skepticism about Europe, and especially Spain, roared back.

Optimism was also tempered, of course, by the prospect of continuing uncertainty while Mr. Samaras goes about forming a coalition government and by a recognition that neither Greece nor the euro zone was out of the woods yet.

“The prospect of lengthy coalition talks and then further negotiations between a potentially fragile government and Greece’s creditors will bring more of the uncertainty that has roiled financial markets in recent weeks,” the Financial Times said in a report from Athens.

As my colleague Rachel Donadio writes from the Greek capital: “Any new leader will face an uphill battle to inject confidence into a paralyzed Greek economy that depends heavily on the continued infusion of money from its only remaining lifeline, the European Central Bank.”

Let us know what you think of the election results and the future of the euro in the Comments area below. And follow the market and political reaction all day over on the live blog on The Lede.